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Coal-fired Power Plant (CFPP) Retirement Policy is Important to Accelerate Decarbonization of Energy System in Indonesia

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Jakarta, 22 September 2021 – As one of the extensive contributors of carbon emissions in Indonesia at 32% over 20 years, decarbonization of the energy sector is vital to achieving net-zero emissions that are compatible with the Paris Agreement. The power generation sector, especially coal-fired power plants as the largest source of emissions in the energy sector, therefore it is essential to apply the right policies for coal-fired power plants.

Based on the analysis of the Institute for Essential Services Reform (IESR), there are two policies to reduce emissions from coal-fired power plants to comply with the Paris Agreement, which is moratorium and retirement of the coal-fired power plants from their usual lifespan 30 years to 20 years. This is stated by Deon Arinaldo as Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR) in his presentation at the Indonesia Energy Transition Dialogue (IETD) 2021 organized by the Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR).

Deon said that implementing the policy requires an optimal roadmap to minimize costs and impacts as low as possible. In his opinion, it can rely on data and in-depth analysis carried out for each unit of the coal-fired power plant (CFPP) in Indonesia.

“What needs to be analyzed is the age of the coal-fired power plant because it is related to the contract, the contract effectiveness, operational cost compared to the retirement cost, the readiness for planning the electricity system, and non-technical aspects such as employment, pollution & human resource capabilities,” explained Deon.

Moreover, in compiling a roadmap for coal-fired power plant’s retirement, Deon said many strategies can be considered, including refinancing, and investment in renewable energy, repurposing, and retrofitting the CFPP.

“Economically, renewable energy generation is much cheaper than coal-fired power plants. If this policy is not implemented immediately, the State Electricity Company (PLN) is projected to become the company with the second-largest asset with the possibility of stranded assets of up to USD 15 billion,” added Deon.

State Electricity Company (PLN), through Herry Nugraha, Head of the Center for Excellence, said that his party responded to the National Electricity Supply Business Plan (RUPTL) and prepared a decarbonization roadmap by conducting various studies and analyzing data on coal power plants in Indonesia.

“We routinely record how much capacity, when retirement, the performance of each power plant, reliability, production of CO2 of each unit is calculated annually for the evaluation,” explained Herry.

The Director of Electrical Engineering and Environment of the Ministry of Energy and Mineral Resources, Wanhar, explained that the Energy Transition Mechanism (ETM) has included a mechanism to replace the capacity of the coal-fired power plant with new renewable energy (NRE).

“Indeed, need a study to do it, in collaboration with the Asian Development Bank. Also, we have held discussions with stakeholders in the coal industry about this mechanism,” he said.

Architrandi Priambodo, Senior Energy Specialist, Asian Development Bank (ADB) admits that currently, his party is developing an ETM that ensures an equitable or just energy transition.

“In the end, it is the community that receives and enjoys the electricity, so we ensure that the retirement of coal-fired power plants does not harm workers, the environment and supports social aspects, including inclusiveness,” said Chitra.

Roy Torbert, principal of the Rocky Mountain Institute, added that the funds obtained from the refinancing process could be used to invest in renewable energy and help affected communities, such as workers, to transition to new jobs.

Leaving coal-fired power plants requires innovation in renewable energy technologies that will take them over. Muhamad Reza, Engineering Expert, Business Development & Energy System Business Line Manager, Tractebel Engineering Indonesia stated that when variable renewable energy (VRE) enters the system, not only does the load fluctuate but also slightly from the generation side.

“The anticipation is that we must look for technology that can meet those needs, and we need to ensure its technical and economic feasibility,” said Reza. He added that energy storage technology or batteries will hugely help these problems.

Regarding PLN’s readiness, Djoko Prasetijo, Deputy Chairperson of Conseil International des Grands Réseaux Électriques (CIGRE) Indonesia stated that PLN does not need to worry about dealing with the entry of VRE.

“PLN’s colleagues (State Electricity Company) are used to dealing with variability, for example, demand from morning to night is also different. If, for instance, there are thousands of MW (solar PV-ed) in Java, our grid is supposed to be able to handle 3,000 – 4,000 MW as long as Solar PV (PLTS) is spread geographically,” he concluded.

The IETD 2021 event is in collaboration with Clean, Affordable, and Secure Energy for Southeast Asia (CASE), a partnership project from several countries in Southeast Asia and is funded by the Federal Government of Germany. Further information can be accessed at ietd.info.

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